Copyright Los Angeles Times
Tesla Inc.’s profit plunged more than expected as sharply rising costs undercut a record quarter of vehicle sales. Adjusted earnings were 50 cents a share in the period, down 31% from a year ago, the company said Wednesday in a statement. Analysts had expected 54 cents on average in estimates compiled by Bloomberg. Revenue of $28.1 billion beat expectations. The results show the EV manufacturer isn’t immune to the rising costs that have buffeted the nation’s auto industry all year as President Donald Trump radically overhauls policy. Tesla’s operating expenses soared 50% to $3.4 billion in the quarter, while the company expects about $400 million of impact from US tariffs. Chief Executive Officer Elon Musk is promising a future built around artificial intelligence, humanoid robots and self-driving technology — points he underlined on Tesla’s conference call with investors. Investors have largely bought into Musk’s vision, driving the shares up 8.7% so far this year through Wednesday’s close. But there’s uncertainty about the timeline to develop these businesses and the costs associated with building them out. Tesla’s central business of selling vehicles is also facing renewed scrutiny as competition intensifies and US fiscal incentives are phased out. “We’re entering a time where there’s a lot of questions around near-term and intermediate-term earnings growth trajectory for Tesla,” said Garrett Nelson, senior equity research analyst at CFRA. Chief Financial Officer Vaibhav Taneja acknowledged that competition and tariffs represent obstacles for the company. The shares dropped 4.1% at 6:05 p.m. in extended trading in New York. The stock extended declines after Musk concluded his introductory remarks on Tesla’s conference call, signaling investors’ disappointment that the company offered only limited details. “The market’s realizing Tesla trades like an AI platform, but reports like a carmaker,” said Haris Khurshid, chief investment officer at Karobaar Capital. Dec Mullarkey, a managing director at SLC Management, said “there is not much here to inspire investors.” Tesla reiterated language from the previous quarter that it’s “difficult to measure” how shifting global trade and fiscal policies would impact its businesses and operations. The company sees results hinging on the broader economic environment as well as its speed in accelerating autonomy efforts and ramping up production for key products. Analysts surveyed by Bloomberg expect Tesla to report a second year in a row of declining vehicle deliveries. Earlier this month, Tesla reported record third-quarter sales as customers rushed to take advantage of a $7,500 US tax credit for EV purchases that expired Sept. 30, delivering a temporary boost to the company’s core automotive business. On Wednesday, Tesla reported $417 million in revenue from regulatory credits it receives from other automakers that exceed emissions standards — only slightly below the previous quarter’s amount. Policy changes under the Trump administration have reduced demand for the credits. Tesla has said it anticipated a decline in that business. Musk expects Tesla’s robotaxi business, which launched in Austin in June, to expand to as many as 10 metropolitan areas by the end of the year if the company receives the necessary approvals. He also said the company would remove most human safety operators from robotaxis in Austin later this year. It’s not clear how many of the vehicles are currently operating there after the EV maker launched with about ten to twenty vehicles. Tesla also operates a rideshare service in the San Francisco Bay area that is not fully autonomous and is more akin to Uber. It has test permits for Arizona and Nevada. Free cash flow was nearly $4 billion, up significantly from the previous year and well above the average analyst estimate of $1.25 billion.
